A degree of realism finally is entering the property market with sellers lowering expectations of how much their home is worth and dropping asking prices.
With the average asking price falling to £235,219 this month (July), compared to £239,564 in June, new sellers are cutting the amount they are asking for their homes by an average of £4,345 (down 1.8%).
Unsold housing stock also hits a new record level, despite fewer properties coming onto the market.
According to the latest figures from Rightmove, banks, worried about being blamed for a second housing crash over the last 20 years, have helped create a ‘mortgage famine’ that has wiped out the spring market.
The good news for those moving up the property ladder is that the rungs are moving closer together. If you can sell your home and avoid ‘brickor mortis,’ you might be able to pick up a property one rung up the ladder at a sensible price.
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As new sellers are now asking 2% less for their homes than a year ago, sellers finally are recognising they need to undercut their rivals from the outset, rather than testing the market and dropping prices later, says Mile Shipside, commercial director of Rightmove.
‘While this £4,000 reduction is on top of a £3,000 drop last month, sellers’ pricing needs to be at the level where deals are being done. It could be a better outcome to price aggressively and sell now, rather than accept a bigger reduction later as prices continue to fall,’ he says.
Although price falls in the US market are driven by rising unemployment and the
shock of fixed rate mortgages resetting to unaffordable interest rates, the UK is not being hit to the same extent. It is unlikely we will see falls as big as those in the worst hit areas of America, the report states.
The ‘doom and gloom’ attitude should be about the drastically low level of
sales, which affects the wider economy, and not about falling prices: ‘Unless you are trading down, inheriting, or in danger of negative equity, the effect of falling prices is neutral or indeed good for some,’ the report adds.
‘A positive of this tougher market is the closing of the rungs on the housing ladder when trading up from one property to the next.’ Since the peak, the average gap for those trading up from a terrace to a semi-detached home has narrowed by £1,000. The difference is more marked for those moving up from a semi to a detached property, with an average drop of £3,500.